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Ellen
Ellen, Attorney
Category: Business Law
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Experience:  25 years of experience helping people like you.
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Can a corporation set up numerous LLCs to commit credit fraud

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Can a corporation set up numerous LLC's to commit credit "fraud"? Here is a ficticious example: Mr. X owns a very large automotive repair shop named X, Inc. For the purpose of mitigating risk, he creates a separate LLC for each of the repair specialties at his shop. Muffler LLC; Brakes LLC; Tune Up LLC. Mr. X opens a unsecured charge account at a local auto parts store. He has a separate account for each LLC. He orders $10k in parts under each LLC, charging all to the open accounts. After 6 months, Mr. X decides Muffler LLC should file Chapter 7 due to poor sales. In this case, does the auto parts store have recourse against the parent company or the other two LLC's?
Submitted: 8 years ago.
Category: Business Law
Expert:  Ellen replied 8 years ago.

Hello,


Thank you for your question. I am happy to assist you.


Based only on the facts presented in your hypothetical, the auto parts store would not have recourse against the parent company or other LLCs. This would not be credit fraud but rather would be considered asset protection planning.


I hope that the information which I provided was helpful to you.


Best wishes for a Happy New Year. If you have additional questions, please do not hesitate to submit them to me directly.


Thank you,
FLAandNYLAWYER


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